New Labour Codes: Changes to 50% basic salary, 8-hour work and PF-gratuity

Four new labor codes have come into effect in the country from November 21, 2025. These codes have created a new system by merging 29 separate labor laws. 

The Code on Wages, the Industrial Relations Code, the Social Security Code, and the Occupational Safety and Health Code will now change many rules related to the working relationship between companies and employees. 

While the central government has implemented these codes, the real impact will be visible when state governments issue their notifications.

Appointment letter will become a legal document

Until now, appointment letters were considered solely an HR document, but with the new labor code, their importance will increase. 

Companies will be required to clearly state issues such as salary structure, working hours, holidays, and social security in appointment letters. 

This means employees will now be able to legally enforce their rights. Experts say that companies will be required to make changes as soon as state governments implement the rules. This will increase transparency and strengthen the position of employees.

Major change in salary structure

According to the Code on Wages, at least 50% of the total salary will now be considered wages, or basic salary. Companies will be required to increase basic pay and may have to reduce or modify several allowances. 

This may reduce take-home pay for some individuals, but benefits such as PF, gratuity, bonus, overtime, and leave encashment will increase. This means employees will benefit more in the long run.

Salary slips will be more transparent

Following the new rules, salary slips will include fewer allowances, more clearly listed deductions, PF, and gratuity. This will make it easier for employees to understand their salary in its entirety.

Changes in working hours and holidays

The new rules stipulate a work limit of 8 hours per day and 48 hours per week. Overtime will be mandatory for those who work beyond this limit. Similarly, leave rules will also be clearly stated in the appointment letter. Leave accrual, carry-forward, and encashment rules will be transparent.

Social security will be strengthened

Benefits like PF, ESIC, and gratuity will now be clearly stated in every employee's appointment letter. Fixed-term and contract employees will also be covered by these rights.

What should employees do?

Companies can issue revised letters after state regulations are implemented. Upon receiving the new letter, employees will need to check their basic pay, PF, overtime, and social security.